West African Cocoa Harvest Outlook Weighs on Futures as Supply Picture Shifts

Cocoa futures closed with losses on Thursday, as traders reassess the global supply-demand equation for the commodity. March New York cocoa contracts fell 44 points (-0.74%) to settle lower, while March London cocoa slipped 24 points (-0.55%). The retreat marks cocoa’s pullback to 1-week lows, signaling a shift in market sentiment amid competing bullish and bearish forces.

The Case for Adequate Supply Returns

The primary driver of Thursday’s decline centers on improved growing conditions across West Africa’s cocoa belt. Farmers in the Ivory Coast—the world’s largest cocoa producer—report a favorable mix of rainfall and sunshine that is bolstering tree bloom cycles. Similar accounts from Ghana highlight regular rains supporting pod development heading into the harmattan season. These weather patterns have sparked optimism among farmers about crop quality and yields.

Mondelez, a major chocolate manufacturer, recently disclosed that West African cocoa pod counts currently sit 7% above the five-year average, with counts materially exceeding last year’s harvest levels. Such abundant blooming suggests adequate supplies may materialize as the main harvest ramps up. Ivory Coast’s main crop has only recently commenced, with growers expressing measured confidence about what’s ahead.

Government data from Ivory Coast underscores the supply rebalancing narrative. Through December 14, farmers shipped 895,544 MT to ports during the current marketing year—a marginal 0.2% increase from 894,009 MT during the same period last year. The steady pace of arrivals, combined with favorable growing conditions, has created downward pressure on prices.

Inventory Drawdowns Offer Limited Support

Not all supply signals weigh negatively on cocoa. ICE-monitored inventories held at US ports fell to a 9-month low of 1,642,801 bags as of Thursday, providing some price support despite broader supply concerns. This inventory tightness reflects the residual impact of prior-year deficits that have only recently begun normalizing.

Demand Headwinds Persist Globally

Cocoa demand data paints a sobering picture across major consuming regions. Asia’s third-quarter cocoa grindings—a key demand indicator—plummeted 17% year-over-year to 183,413 MT, marking the weakest Q3 performance in 9 years. Europe’s situation was scarcely better, with Q3 grindings declining 4.8% year-over-year to 337,353 MT, the lowest quarterly reading in a decade. North America bucked the trend slightly with a 3.2% gain, though new reporting company additions distorted the figures. Notably, North American chocolate candy sales volume fell over 21% in the 13-week period ending September 7 compared to year-ago levels, according to Circana research. Halloween 2024 chocolate sales proved “disappointing” according to Hershey’s CEO—a meaningful headwind given that Halloween represents nearly 18% of annual US confectionery demand.

Supporting Factors and Market Catalysts

Citigroup’s recent revision to 2025/26 global cocoa surplus estimates has injected some volatility. The bank cut its projection to 79,000 MT from a September forecast of 134,000 MT, providing temporary price support on that announcement. Rabobank separately trimmed its 2025/26 surplus forecast to 250,000 MT from a November estimate of 328,000 MT.

A potentially significant bullish catalyst looms in January, when New York cocoa futures will join the Bloomberg Commodity Index. Citigroup estimates this inclusion could trigger as much as $2 billion in buying pressure from passive index-tracking commodity funds during the first week of January. Such technical buying could counteract fundamental pressure from adequate supply expectations.

Nigeria, the world’s fifth-largest cocoa producer, presents a mixed picture. The country’s Cocoa Association projects 2025/26 production will contract 11% year-over-year to 305,000 MT from the prior year’s 344,000 MT. September exports remained flat year-over-year at 14,511 MT, adding no new supportive momentum from Africa’s second-largest producer.

Historical Context: From Deficit to Rebalancing

The cocoa market’s journey from severe deficit to potential surplus merits context. In May 2024, the International Cocoa Organization revised the 2023/24 season to show a record deficit of -494,000 MT—the largest in over 60 years. That crisis saw stocks-to-grindings ratios compress to a 46-year low of 27.0%. The organization had estimated 2024/25 production at 4.69 MMT, representing a 7.4% year-over-year increase and the first surplus in four years at 49,000 MT.

Yet the November 28 revision was more cautious, cutting the 2024/25 surplus to 49,000 MT from a prior 142,000 MT projection, with production lowered to 4.69 MMT from 4.84 MMT. The European Parliament’s November 26 approval of a one-year delay to the EU deforestation regulation (EUDR) has extended the window for cocoa imports from regions undergoing deforestation, keeping supplies ample. This regulatory reprieve removes a near-term supply constraint that might otherwise have supported prices.

The convergence of adequate West African supplies, weak global chocolate demand, and regulatory clarity on deforestation has shifted the narrative from cocoa scarcity to measured abundance—a pivot that futures prices have begun to reflect.